196W/E 20 Nov Strangle Win

That Was The Week Markets and Trump Went Nowhere

America, we must assume, is the prime mover of the world’s established markets. So, there is reason for grave concern over political issues. Polemic is not the mandate here but this trader cannot make a decent assessment of risk while the US remains crazy town. Now, news sources tell us the FED are at odds with the US Treasury as some political chicanery is in full flow. However, installing a crazy that can be controlled, as documented here, has not gone well.

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Outcome in Doubt?

Commentators seem unanimous in the outcome that Biden won, so it is troubling that the enraged mob will go on the rampage. However our concern is with trading options- we are, thankfully, so many steps away from this nonsense. Although, any views here will be tainted by the constant concern that markets could flip either way. This trader would venture the analogy that it’s like driving on the motorway and not being  even 50% sure your brakes will work.

 

Distraction Trades

This week was hopeless with DAX in a 200 point range  ±1.5%   Market action was sinusoidal and the only clear signals appeared at unsociable hours. We predict volatility at our peril but even a Bollinger band ‘squeeze’ had lost any of its predictive power. Options traders like us thrive on sideways markets and make comfortable profits. Directional players one can only presume, would have scalped a few meagre points, at best. So, yet again options come up trumps( no pun intended). Sideways markets present great opportunities for theta plays.

Distracted again by email stock tips.

This was a much vaunted mega stock Bill Gates has bet the farm shed on! The power of Google makes it quite easy to find the magic recommendations without signing up to an annoying tip sheet. However, for this trader, anything priced with a P/E of 89.33 is probably not going to do much. So, is 5G this tech miracle we’ve all been waiting for? We’ll come back to this in a few months or so, and you may wish to put it on your watchlist. Robin Hood traders can buy calls!

Legacy Trade 195

Keen observers will note  the ‘spooky’ action at expiry, so clearly our strangle was not troubled this week. See below

 

 

Trade 195 we sold the 6550 call for 6 and sold the 6050 put for 8.5.   Credit 14.5  with  maybe £3k in margin- the return would be 4.8%. 12 of these a year would do….. WINNER!

Trade196  We Abandon the Weekend Strangle for a 2-3 week Time Horizon

Naked, wild and reckless, but enough about me and my own dance preferences! Strangles do go against the grain as we do have naked options, though there is an offset. The luxury of US style data for FTSE is not afforded to us, we are left with mechanical calculations. Or a wet finger in the wind. For analysis regarding Vol quartiles and more in depth research, I like these guys a lot and recommend the good free stuff: https://www.ivolatility.com/home.j

Stranglers we now are! Naked, but with an eye on trade developments. Here’s what we are looking at:

We are selling the Dec FTSE  6600 Call for 25.5 and the 5850 Put for 25  Credit therefore of 50.5. Here’s the spin.  We’ll be ‘cautiously’ looking at closing out at 25% of premium and 50%.

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